U.S. Consumers Likely Ramped Up Spending in August

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Economists say household outlays have increased after the delta-induced summer recession, due to savings and rising wages.

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Economists expect personal income to rise 0.2% in August. The distribution of the federal government’s increased tax breaks to parents helped increase income by 1.1% in July.

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The highly contagious Delta version of the coronavirus triggered a summer slump in spending on food, hotels and airline tickets. Still, consumers are in a strong position to help the economic recovery. They have accumulated a high level of savings and are benefiting from bountiful job opportunities and rising wages.

“Families have enough means to spend,” said Joe Brusuelas, chief economist at RSM US LLP. “Demand should remain strong over the next two to three years as growth is well above the longer-term trend.”

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Mr Brusuelas said that in the near future, supply constraints could create some constraints. Barriers such as backup at US ports and foreign manufacturing disruption remain. Global chip shortages have slammed the auto sector this year, cutting factory production by several million vehicles. The Federal Reserve and economists are hopeful that these disruptions will eventually subside.

While many economists have lowered growth forecasts for the third quarter, they have raised forecasts for the next year – indicating that some spending and production have been delayed by a delta boom, not losing it and supply-chain disruptions. .

Consumer spending is the biggest source of US economic growth and the main fuel for the rapid recovery from last year’s pandemic-induced recession. The economy expanded at a 6.7% annual rate in the second quarter, up from the 6.3% pace in the first quarter, revised data from the Commerce Department showed Thursday.

sales at country retailers grew 0.7% in August, rebounding from a drop in July, the Commerce Department said in a separate spending report published in September. Retail sales include restaurant sales, but most include items such as cellphones, televisions, groceries, and back-to-school items.

The department’s Friday report will provide more details about spending on services — the bulk of the overall outlay — in August.

Data from private firms through September indicates spending is coming down for many services. As Covid-19 cases decline. For example, in the week ending September 29, restaurant occupants were down just 8% compared to the same period in 2019, a less severe drop than the month before, data from reservation site OpenTable show.

Analysts expect the holiday season to boost spending. According to market-research firm The NPD Group, nearly 30% of American consumers intend to spend more this holiday shopping season than they did last year.

The number of Internet searches related to December travel was five times higher in August than a year earlier, according to digital analytics company SimilarWeb.

The motel’s general manager, Alex Gower, said consumers’ increased appetite for travel this holiday season is helping fuel the business outlook for the Foot of the Mountains Motel in Boulder, Colo.

He added that customers are booking stays for November and December earlier than usual. Mr Gower suspects that people are traveling to see family during the holidays, but they do not necessarily stay home with them.

Foot of the Mountain’s business grew strongly this summer, although room cancellations associated with the Delta version accelerated, Mr. Gower said. He said the small motel offers people the ability to isolate in outdoor-accessible rooms and use contactless check-in.

“People are looking for us because of those factors while raising awareness about the contagion,” Mr Gower said.

write to [email protected] . But Sarah Chaney Cambon


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